Hedge funds could not move the market and bring down the Euro, they say.

"On a real-adjusted basis, fair-value for the euro is 1.24. The euro is .10 higher than it was a year ago. A few hedge funds getting together is not going to move the euro for very long, it is an enormously deep market."

So why is the U.S. Justice Department investing Soros Fund Management's, SAC's, and Greenlight Capital's short positions against the euro?

"This is just a distraction from the real problem facing policymakers."

US policymakers could get always get creative with their restrictions, but it is hard to imagine their dealing a decisive blow to the FX short market.

"It's impossible, the FX market is the most liquid and largest market in the world."

But during the crisis, the government banned shorting financials, and now they could potentially flat-out ban short selling or just tell hedge funds to close their positions in Europe.

"Why don't they just call that a ban on buying the dollar?" Is what how one hedge funder responds to that suggestion.

(Because that's effectively the same as shorting the euro.)

Of course European governments could inflict some pain on investors that are abroad. Hedge funds like Brevan Howard might have sold out of their positions against the euro just so they won't be slammed by a potential crackdown. Shorting struggling countries is also terrible PR.